Future of the Steel Industry - Westminster Hall

Today I took part in a Westminster Hall debate on the Future of the Steel Industry, my speech is included below, or you can watch it on the video at the bottom of the page. To view the full debate, click here

It is a pleasure to serve under your chairmanship

Mr Davies.

I want to thank my friends, the Hon Members for Redcar and for Middleborough South and East Cleveland, for securing today’s debate and for their contributions.

A year on from the closure of Redcar, our steel industry is still in crisis. Make no mistake, we are staring into the abyss.

My Aberavon Constituency is built around the town of Port Talbot, which is living under a cloud: we are a steel town, the steelworks is the blazing heart of our economy, our community and our lives: and we don’t know if it has a long-term future.

Our steel industry and the communities that are built around it face a perfect storm: a long-term declining British manufacturing base; an economy that, particularly in light of the EU Referendum faces fundamental challenges; and a government that's quick when it comes to excuses, but glacial when it comes to solutions or strategy.

And this perfect storm it comes together to create an uncertainty that has a real and lived effect.

It is not only hitting the order book – running down the short term prospects of our industry, without which there can be no long term – but it’s also affecting people’s lives.

I have constituents who can’t get mortgages or loans because there’s no guarantee they’ll have a job in 6 months; who don’t know if they’ll be able to help their kids through University or college; who – simply put – don’t know if they and our town – Port Talbot – have a future.

And this existential uncertainty has been dragging on for a year now.

Joint Venture

Just three months after Redcar closed we learnt of 1,000 steel jobs losses across Wales, 750 of them in Port Talbot.

The men and women of Port Talbot, Llanwern and the rest of Tata in Wales were, for more than two months, left in limbo, unsure if theirs would be the jobs that went.

Then, about a month later, came the potentially devastating news that Tata wanted to sell.

From a fire sale we got the slow burn, which somehow morphed into the Joint venture by July.

And today we are no clearer.

We’re told the Joint venture is still theoption, but what that means isn’t clear.

What does it mean for primary steelmaking; for investment, and jobs?

Is Tata’s British arm even part of the Joint Venture plans?

Well apparently not unless there’s a resolution on pensions.

But any further delay has a real impact. Because there are very practical decisions that have to be made now if this industry is to continue - for example, relining the second blast furnace at Port Talbot, without which there is no sustainable future for primary steelmaking in this country.

That's why the government, along with both companies, must set out clearly what the Joint Venture really means, and give us cast iron guarantees – as Roy Rickhuss of Community called for just this week – on jobs, investment and the long term future of Port Talbot and the rest of the business.

Because the fear is that this Joint Venture is little more than a smokescreen for cutting Tata Steel UK loose to consolidate the business on the continent.

ThyssenKrupp have never shown any interest in Tata’s UK operations. And we know the Joint Venture is right at the bottom of their priority list with their internal restructuring, domestic jobs guarantee and ongoing negotiations with IG Metall, the German Union.

Add to on top of that Tata’s complex internal dynamics, as seen in changes in Mumbai, and we see a Sword of Damocles, forged by an inept government with dumped Chinese steel, hanging over the heads of Port Talbot.

Brexit

The situation is even more precarious following the vote to Leave the European Union.

Brexit poses real challenges for our industry as over half our exports go to the continent. Therefore it is essential that the government acts to protect the steel industry through the Brexit process and the negotiations that will come with it.

First, it must ensure continued access to the Single Market and membership of the Customs Union.

This matters because it will allows us to avoid tariffs that would devastate the industry, and also because it strengthens our hand in fighting Chinese dumping.

So the Minister should, today, confirm that his Government will strain every sinew to ensure tariff free access to the Single Market for British steel, and the tariff protections that come from standing with a market of half a billion consumers.

And second, to act to protect the steel supply chain.

Around half the steel used by UK carmakers comes from Tata and Port Talbot: the automotive and steel industries are inextricably bound together – and both need the other to stay in the UK to be successful. And so last week’s news around Nissan was welcome, but the Government must commit to offering the same terms to other automotive producers, from GM to Toyota to Ford and JLR, to ensure they remain in Britain.

Value of the pound

These are just two of the actions the government must take to ensure the future of the steel industry.

However, it is this government that is the greatest cause of uncertainty for our communities.

For years, we’ve seen an approach characterized by indifference and incompetence. And now we can throw in complacency.

The government acts like the weakness of the pound is a knight in shining armor, riding to the rescue of the steel industry. Whereas in reality it is a Trojan horse, attacking our industry from within.

In the short term, the 15% drop in the value of the pound has helped UK steel exports. But come the New Year – the penny will soon drop. The cost of the raw materials that we have to import – the coke, the coal, the iron ore and energy – will shoot up.

These costs have a huge impact on the bottom line, as it already is for those processing scrap, who buy month-to-month, or week-to-week.

As Bimlendra Jha put it two weeks ago: “you can’t make a business profitable on currency, we have to make it profitable on a structural basis”.

The reality is the industry doesn't see the structural problems being fixed because we’ve got government that can talk a good game, but that sits on its hands.

But it is straightforward to change that. And so the government must show concrete action in a number of areas.

First, will it guarantee that the co-investment and soft loans offered last April still stand?

Second, will the government finally – twelve months on from Redcar – make progress on the 5 Asks?

Third – will it protect the steel industry from further Chinese dumping by voting against Market Economy Status for China?

This month the European Council will decide its position on this question, ahead of the December vote at the WTO.

Lets be clear: A China with Market Economy status is a China that can and will keep on dumping with impunity.

So can the Minister let us know how the UK Commissioner will be mandated on MES – will he vote in accordance with the European Parliament, and the clear will of this House?

The Autumn Statement gives the government other opportunities to give steel a fighting chance.

They can remove plant and machinery from the calculation of business rates in a way that can also compensate local authorities.

And crucially, by acting on energy prices.

The Minister will, I have no doubt, point to the compensation package and talk about energy efficiency.

Fine, but that should be the icing on the cake.

We need the actual cake first.

Our prices are £17per mega-watt-hour higher than those of Germany – that's 40-45% more expensive.

And it is killing the competitiveness of our industry.

You can’t save 45% through energy efficiency alone.

And so once again we see a government motivated by tactics not strategy.

More interested in producing a political fig leaf to keep us quiet, than in solving a problem.

But we won’t be silent.

The industry and the workforce won’t be silent.

And our communities won’t be silent.

Because we know that our futures depend on it. And we know that government can and must do better.

To quote Bimlendra Jha again: “while there has been a turnaround… we are still not out of the woods… whether you drown one foot under the water or 10 foot, you still drown”

And so that’s why we need a proper industrial strategy for the steel industry.

The government’s future capabilities assessment is a welcome baby step towards this, but it is no Industrial Strategy.

But for that the government will have some help from us as next month the Steel APPG will publish our Industrial Strategy document.

Showing how an active and engaged government, motivated by strategic economic, rather than tactical political thinking, can build the environment for our industry to thrive:

+ creating a level playing field on cost and trade

+ connecting up supply and demand

+ building enforceable procurement rules

+ and forging a new model of partnership for growth and progression.

Because just as iron needs oxygen to be transformed into steel, our industry needs a strategic and engaged state, working in partnership with the Industry, Unions and workforce.

Mr Davies the future of steelmaking in the United Kingdom is hanging in the balance.

The future of the thousands of steelworkers, their families and their communities in Aberavon, and across the country is hanging by a thread.

We can overcome the uncertainty and build a bright and secure future, but only if we act.